The SWOT Analysis is for the Inexperienced

“The SWOT analysis is for the inexperienced” is what a MBA professor exclaimed in a business strategy course I took a couple years ago. I, along with my fellow students, was astonished to hear that statement. I mean, really. We all thought the SWOT analysis was a golden tool to help build strategy. We tried to convince the professor to change his mind on the SWOT tool. But the professor held firm on his statement.

A SWOT analysis is a common strategic planning tool that identifies an organization’s strengths, weaknesses, opportunities and threats. Ultimately the goal of this tool is to help identify internal and external factors that might impede or support key objectives.

At the start of every year, planning for the near term and future, is usually top of mind for the C-Suite, HR executives, leadership, and board members. Planning sessions are no doubt on many upcoming meeting agendas. More often than not, the SWOT analysis will show up as one of the agenda items.

It turns out the professor I spoke about earlier made some valid points. Don’t get me wrong. This is not about dismissing the SWOT analysis. But instead this is about expanding our thinking as opposed to just sticking to a “common think box” of what is most popular. There is various strategy planning methods. When it comes to objectives such as obtaining a competitive advantage, the right strategy and effective execution is a key to success. So it stands to reason that we must be able to utilize strategy planning methods up front that are most effective.

Here is a high level overview of three strategy-planning methods:

The SWOT Analysis – The SWOT analysis as stated above is a tool that emphasizes the consideration of an organization’s strength, weaknesses, opportunities and threats. The SWOT analysis is applied in non-profit and for-profit settings. It is utilized for organization-wide or individual based analysis. Marketing discipline may also use this tool to assess competitors.

The advantage of the SWOT (or “WOTS up” in some circles): “One of the greatest advantages of SWOT analysis is that it helps to summarize and clarify whatever opportunities and issues are facing a business or project” (Uhl). It is a tool that provides a simple structure to identifying areas that can impede or propel objectives.

A disadvantage is that the tool is considered too simplistic in nature and doesn’t account for complexities such as to what degree the strengths and weaknesses exist. More research is required to learn to what level are issues and opportunities. An organization, department or individual may be weak in something, but it may not be to the degree that it would undermine objectives. So putting resources on something identified, could be a waste and better served on other key strategies.

Scenario Planning – "Scenario planning is a discipline for rediscovering the original entrepreneurial power of creative foresight in contexts of accelerated change, greater complexity, and genuine uncertainty" (Wack.) Scenario Planning is a strategic planning method that sets a flexible path for long term planning. This process seeks to answer the question, “What if?” From that point, decision makers can consider developing strategies to address each possible scenario. “Scenario Thinking, introduced by Shell Group Planning in the 1970s, has evolved as a powerful methodology to enable groups to structurally anticipate change and incorporate external uncertainty into the internal decision making process.

The advantage of scenario planning is that it can be a powerful tool in deciding course of action especially in times of uncertainty. This tool will help give some insight in when to advance and when to retreat in a strategy plan given a particular scenario.

Disadvantages to this method are time spent and ambiguity. Just imagine how many possible scenarios your organization faces today that could possibly impact objectives. Now sit down and talk about them. Okay now decide which scenario is imminent and which will likely occur 5-10 years from now. How do you know? This exercise will most likely going to take more than just a simple 1 hour meeting and certain the need to validate before investing in decisions made.

Distinctive Competencies – Distinctive Competencies, also known as core competence analysis, identifies what it is your organization does better than anyone else. An assessment of the internal and external environment helps to determine strengths. Once a strength is identified that will meet market needs and delivers a competitive advantage that becomes an organization’s core competency. What gets real interesting about this strategy is determining future core competence.

Helping organizations identify strategies around building new or strengthening existing resources and capabilities is a definite advantage to this method. Ultimately this method could propel an organization’s ability to compete in a global and local marketplace.

However the downside is if key decision makers do not understand what consumer’s value. There is the risk of over differentiation and charging a higher price than what consumers are willing to acknowledge with their wallets.

Of course several there are other strategy methods such as issues and value based assessments, and Porter's Five Forces. Ultimately each strategy planning method holds value. But which one to use depends on the organization’s objectives, planning history, culture, and environment. In some cases a hybrid approach to planning where “one size don’t not fit all” may be the best planning method.

What are your experiences with strategic planning? Which method do you use or have found most helpful?

Tresha D. Moreland, MBA, MS, FACHE, SPHR, SSBBP, founder of HR C-Suite, is an HR thought leader in Human Resource Strategic Management. She has held key human resource leadership roles for over 20 years in multiple industries most recently a senior vice president in the healthcare industry.
Tresha is the founder and publisher of HR C-Suite (www.hrcsuite.com). HR C-Suite is a game changer results-based HR strategy website. It is a first-of-it's-kind site that organizes HR strategy based on desired business result.
She has developed a business philosophy of integrating human resources with business strategy, thus creating a hybrid HR leadership approach. This approach enables the leveraging human resources to achieve business results.

I agree that a hybrid approach is called for in most cases, whether as a thought provocation exercise or as a communication tool. I personally like the logical approach of Porters Five Forces and the Value-Chain Thinking approach. The analysis of specific activities and whether they create a true competitive advantage is a powerful tool and makes the connection to bottom-line activities that can be communicated and acted on. SWOT and Scenario Planning can be used as supporting and testing activities. I have seen this approach work well in both large and start-up companies.
Thank you for a timely and thought-provoking article.

Ellen, Thank you for your comment and insights. I am glad to see what you wrote about Porters Five Forces and Value Chain approaches. I agree, they have a logical way of expanding our thinking. Tresha

Henrik Anker Jørgensen / February 6, 2012

Excellent article, gets you right out on the edge of the chair.

I have recently faced the fact that when summing up a PESTEL Analysis with the SWOT, you are often left with a longer list of issues that needs further analysis.

But where to start, we will not have a chance to analyze them all thurroughly and also within a reasnoble timeframe putting something forward for decisions and actions.

So what to do when time and ressources are scarce.?

We started scoring the items on the SWOT with numbers from 1-9 in order for us to identify which items to address first. Not at all rocket science, i know! but helpfull when then figuring out where to put our efforts first.

Thanks for a great article.

Joseph Riden / February 8, 2012

The most important thing about planning is to do it, and do it well.

The second most important thing is to assure it ties customer needs and wants together with realistic, achievable organizational goals. A shorter span of inquiry will not support meaningful progression. Focus is needed at points but each planning segment should be tied to the big picture.

The third thing — planning should be held accountable. Bad planning is an even bigger time waster than dysfunctional meetings.

Whatever methods of analysis and synthesis are tried, they can be measured by how well they support ease, frequency, timeliness, and depth in planning along with the impact of insights generated.

A planning methodology will have strengths and weaknesses
like any complex tool. Companies do well to try different approaches and find a hybrid that works best for their environment and scenarios. There’s simply no single right way yet effective planning is crucial to success.

So how to plan should itself be the focus of an ongoing planning effort. You should always be planning and evaluating how you plan.

Science rules. Try different approaches and measure results. Keep doing what works, and leave all else behind. To make your planning truly valuable, assure it lives up to a standard based on measurements. If it doesn’t have outcomes that propel goal achievement, it’s a waste.

Plan to plan well and over time, what’s best for an organization will become vividly apparent.